May 29, 2009
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News: Credit Cards and Youth
Students will have a more difficult time getting credit issued to them; however, will experience easier times down the road. The new credit card reform act recently signed into law by President Obama is scheduled to go into effect by February 2010 has provisions to protect students. The new law prohibits credit card companies from setting up solicitations on or near college campuses. The law also prohibits companies from giving away free teaser gifts such as t-shirts, iPod, blankets, etc. to any individual under the age of 21. Many of these tactics have occurred in the past luring students to sign up for cards as early as the very first day of classes. These students who are often away from home for the very first time had become the target of many banks who have charged them high interest rates and huge penalties and fees. There have been a growing number of students who have learned the hard way. Many end up beginning their new life after graduation buried deep in credit card debt.
Sallie Mae recently reported that 84% of college students had a minimum of one credit card and an average debt balance of over $3,000. Lawmakers are aware of the growing need to protect young adults from falling into these traps and included the provisions in the law. The new legislation now requires a parent or guardian co-sign for the credit card. The measure will protect both the student and the bank. If the student fails to pay, mom and dad will have to pick up the tab. Additionally, the bank will be required to notify the co-signer of any potential credit limit increase on the card.
Lastly, the act requires that students attend a credit card and debt counseling course. Lawmakers are encouraging colleges to include this course in with their orientation programs. Certainly the new law has placed obstacles in place to make it more difficult for students to obtain cards. However, it does not eliminate the possibility altogether especially when financial education is approached in a mature fashion with a total family commitment.